You shake hands after a productive meeting. Everything feels settled. Then weeks pass, and suddenly the other party backs out or insists they agreed to completely different terms.
Our friends at Eric Lindh Foster Law, LLC see this scenario play out constantly with business clients stuck between informal agreements and legal reality. A commercial litigation lawyer can help you figure out when verbal commitments actually create binding obligations.
What Makes A Contract Valid
Most people think contracts need signatures and formal documents. They don’t. A contract exists when certain elements come together, whether or not anything gets written down. Courts generally recognize a contract when you’ve got these components:
- An offer from one party
- Acceptance by the other party
- Consideration (something of value exchanged)
- Mutual intent to be bound
- Definite terms
You’ll notice “written document” isn’t on that list. Oral agreements can be just as enforceable as signed contracts. Proving their existence just becomes harder.
The Challenge Of Proof
The biggest problem with handshake deals isn’t whether they’re legally binding. It’s showing what was actually agreed upon. When disputes arise, each party remembers the conversation differently. Sometimes drastically so. Written contracts eliminate this headache by creating clear evidence of terms. Without documentation, you’re stuck relying on witness testimony, email exchanges, text messages, or other scattered evidence to prove the agreement existed at all.
When Oral Agreements Must Be Written
Some contracts can’t be enforced unless they’re in writing. The Statute of Frauds, adopted in various forms across most states, requires written agreements for specific types of transactions. You’ll typically need something in writing for:
- Real estate sales or leases longer than one year
- Contracts that can’t be performed within one year
- Promises to pay someone else’s debt
- Sales of goods over a certain dollar amount
Even if you had a firm handshake and verbal commitment on these matters, courts won’t enforce them without written documentation. Period.
Business Deals Gone Wrong
Business relationships often start casually. Two entrepreneurs meet for coffee and outline a partnership over lattes. A vendor agrees to supply products at a certain price during a quick phone call. A consultant accepts a project based on a fifteen-minute conversation. These informal beginnings can absolutely create binding contracts if the basic elements exist. Problems surface when important terms aren’t discussed in detail or when each party makes different assumptions. Price matters. Timeline matters. Deliverables, payment terms, and termination rights all matter. Vague agreements leave massive room for disputes. One party might believe payment was due immediately, while the other expected net-30 terms. Neither is necessarily wrong, but now you’ve got a problem.
Protecting Yourself In Informal Negotiations
You don’t need a lawyer present for every business conversation. But you should take simple steps to clarify agreements, even informal ones. Follow up important discussions with an email summarizing what you understood was agreed upon. Ask the other party to confirm or correct your understanding. This straightforward step creates documentation and reveals misunderstandings before they become expensive problems. For significant transactions, insist on a written agreement before performance begins. A simple one-page document outlining key terms provides far better protection than even the most enthusiastic handshake.
Partial Performance Changes Everything
Sometimes actions speak louder than words. If one party begins performing under an oral agreement, courts may enforce the contract even without written documentation. Partial performance demonstrates the agreement existed and that both parties intended to be bound. A vendor who ships products based on a verbal order has created evidence. So has a contractor who starts work after a handshake meeting. These actions support the contract’s existence in ways that post-dispute testimony often can’t.
Getting Help With Contract Disputes
Handshake deals that fall apart create messy legal situations. Without clear documentation, resolution depends on piecing together evidence from multiple sources and interpreting what was truly agreed upon versus what each party wanted to believe was settled. If you’re facing a dispute over an oral agreement or want to make sure your business arrangements are properly documented, legal guidance can help protect your interests and prevent future conflicts. Understanding your rights and obligations under informal agreements often makes the difference between enforcing a beneficial deal and losing out on what you thought was a done deal.